Zix Corporation reports 118% EBITDA growth in 2020 and 7.9 pp EBITDA Margin growth from 10.8% to 18.7%
02/25/2021 • About Zix Corporation (
$ZIXI) • By InTwits
Zix Corporation reported 2020 financial results today. Here are the key drivers of the company's long term financial model:
- Zix Corporation is a fast growth stock: 2020 revenue growth was 26.0%, 5 year revenue CAGR was 31.9% at 2020 ROIC 1.4%
- Zix Corporation has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.8%. At the same time it's in pair with industry average of 3.7%
- CAPEX is quite volatile: $18m in 2020, $12m in 2019, $4m in 2018, $3m in 2017, $2m in 2016
- The company has potentially unprofitable business model: ROIC is 1.4%
- It operates with high leverage: Net Debt/EBITDA is 5.0x while industry average is 18.4x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 26.0%. Revenue growth showed slowdown in 20Q4 - it was 14.9% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 7.9 pp from 10.8% to 18.7% in 2020.
Gross Margin decreased on 7.3 pp from 55.7% to 48.4% in 2020. Gross Margin stuck to a declining trend at -9.3 pp per annum in the last 5 years. SG&A as a % of Revenue dropped on 13.3 pp from 49.1% to 35.9% in 2020.
Net Income margin increased on 5.5 pp from -8.4% to -2.9% in 2020.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 8.2% in 2020. CAPEX/Revenue increased on 3.6 pp from 4.6% in 2017 to 8.2% in 2020. For the last three years the average CAPEX/Revenue was 7.0%. CAPEX as a % of Revenue stuck to a growing trend at 1.1 pp per annum in the last 5 years.
Return on investment
The company operates at low but positive ROIC (1.4%) and negative ROE (-17.0%). ROIC increased on 5.6 pp from -4.2% to 1.4% in 2020. ROE increased on 6.6 pp from -23.6% to -17.0% in 2020.
Leverage (Debt)
Company's Net Debt / EBITDA is 5.0x and Debt / EBITDA is 5.6x. Net Debt / EBITDA dropped on 4.6x from 9.6x to 5.0x in 2020. Debt jumped on 17.7% while cash surged on 60.0%.
Zix Corporation has no short term refinancing risk: cash is higher than short term debt (268.3%).
Management team
The company's CEO is David J Wagner "Dave". David J Wagner "Dave" has 5 years tenure with the company. Zix Corporation's CFO is David E Rockvam "Dave". David E Rockvam "Dave" has 4 years tenure at the company.
Financial and operational results
FY ended 12/31/2020
Zix Corporation ($ZIXI) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 60.1 | 65.7 | 70.5 | 173.4 | 218.5 | 26.0% |
| Gross Profit | 49.6 | 53.1 | 55.3 | 96.5 | 105.7 | 9.5% |
| SG&A | 30.7 | 31.9 | 34.0 | 85.2 | 78.3 | -8.1% |
| EBITDA | 11.6 | 13.0 | 13.7 | 18.8 | 40.9 | 118.1% |
| Net Income | 5.8 | -8.1 | 15.4 | -14.6 | -6.4 | |
Balance Sheet
|
|---|
| Cash | 26.5 | 33.0 | 27.1 | 13.3 | 21.4 | 60.0% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 6.1 | 8.0 | 29.8% |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 187.4 | 219.9 | 17.4% |
Cash flow
|
|---|
| Capex | 2.1 | 3.0 | 4.2 | 11.7 | 18.0 | 54.6% |
Ratios
|
|---|
| Revenue growth | 9.9% | 9.2% | 7.3% | 146.1% | 26.0% | |
| EBITDA growth | 15.4% | 11.5% | 5.6% | 37.3% | 118.1% | |
|
|---|
| Gross Margin | 82.5% | 80.8% | 78.5% | 55.7% | 48.4% | -7.3% |
| EBITDA Margin | 19.3% | 19.7% | 19.4% | 10.8% | 18.7% | 7.9% |
| SG&A, % of revenue | 51.1% | 48.5% | 48.2% | 49.1% | 35.9% | -13.3% |
| Net Income Margin | 9.7% | -12.3% | 21.9% | -8.4% | -2.9% | 5.5% |
| CAPEX, % of revenue | 3.6% | 4.6% | 5.9% | 6.7% | 8.2% | 1.5% |
|
|---|
| ROIC | 17.6% | 22.0% | 19.0% | -4.2% | 1.4% | 5.6% |
| ROE | 11.0% | -17.4% | 29.6% | -23.6% | -17.0% | 6.6% |
| Net Debt/EBITDA | -2.3x | -2.5x | -2.0x | 9.6x | 5.0x | -4.6x |
Zix Corporation ($ZIXI) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 52 | 53 | 55 | 58 | | 79.0% | 16.2% | 14.6% | 14.9% |
| EBITDA | 10 | 9 | 11 | 11 | | - | 40.5% | 29.2% | 64.6% |
| Net Income | -1 | -2 | -1 | -3 | | - | - | - | - |
Balance Sheet
|
|---|
| Cash | 16 | 14 | 24 | 21 | | -2.4% | 24.1% | 135.1% | 60.0% |
| Short Term Debt | 6 | 5 | 5 | 8 | | 91.2% | -5.9% | -15.8% | 29.8% |
| Long Term Debt | 193 | 192 | 191 | 220 | | 9.7% | 2.7% | 2.6% | 17.4% |
Ratios
|
|---|
| Gross Margin | 50.3% | 47.0% | 49.1% | 47.3% | | -11.7% | -8.8% | -6.1% | -5.0% |
| EBITDA Margin | 18.4% | 16.3% | 20.5% | 19.6% | | 28.7% | 2.8% | 2.3% | 5.9% |
| Net Income Margin | -1.6% | -3.6% | -1.3% | -5.1% | | 19.8% | 4.5% | 2.0% | 1.0% |
Peers in Application Software
Below we provide Zix Corporation benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | - | -0.2% | -95.9% | 34.9% | 355,942.4% |
| AudioEye, Inc. ($AEYE) | - | 175.5% | 106.6% | 90.2% | 90.2% |
| Cloudera, Inc. ($CLDR) | - | 57.2% | 42.6% | 28.9% | 65.5% |
| Integrated Ventures Inc ($INTV) | - | - | - | -8.9% | 62.7% |
| Smartsheet Inc. ($SMAR) | - | 64.3% | 66.1% | 59.7% | 52.4% |
| |
|---|
| Median (92 companies) | 12.0% | 15.7% | 15.2% | 19.4% | 14.5% |
|---|
| Zix Corporation ($ZIXI) | - | 9.2% | 7.3% | 146.1% | 26.0% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Aware, Inc. ($AWRE) | 90.3% | 94.6% | 92.3% | 89.7% | 92.8% |
| Alteryx, Inc. ($AYX) | 81.3% | 83.4% | 91.0% | 90.6% | 91.1% |
| Autodesk, Inc. ($ADSK) | 85.2% | 83.2% | 85.2% | 88.9% | 90.1% |
| Smith Micro Software, Inc. ($SMSI) | 73.2% | 77.9% | 83.5% | 90.9% | 89.9% |
| Cadence Design Systems, Inc. ($CDNS) | 85.9% | 87.8% | 87.9% | 88.6% | 88.6% |
| |
|---|
| Median (89 companies) | 63.8% | 64.4% | 65.3% | 68.4% | 70.6% |
|---|
| Zix Corporation ($ZIXI) | 82.5% | 80.8% | 78.5% | 55.7% | 48.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -1,837.2% | -1,118.0% | -40,379.4% | -23,127.1% | 52.2% |
| j2 Global, Inc. ($JCOM) | 41.7% | 36.5% | 35.7% | 38.6% | 40.5% |
| Intelligent Systems Corporation ($INS) | -5.4% | -12.8% | 33.6% | 43.6% | 40.4% |
| Adobe Inc. ($ADBE) | 31.2% | 34.2% | 35.3% | 35.8% | 39.7% |
| SS&C Technologies Holdings, Inc. ($SSNC) | 34.9% | 37.9% | 27.7% | 38.2% | 38.3% |
| |
|---|
| Median (89 companies) | -5.3% | -4.2% | -3.3% | 2.7% | 6.8% |
|---|
| Zix Corporation ($ZIXI) | 19.3% | 19.7% | 19.4% | 10.8% | 18.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| MicroStrategy Incorporated ($MSTR) | 0.5% | 0.8% | 1.4% | 2.1% | 234.8% |
| Integrated Ventures Inc ($INTV) | - | - | 199.9% | 15.2% | 27.2% |
| Intelligent Systems Corporation ($INS) | 3.8% | 9.7% | 4.3% | 4.9% | 19.2% |
| LivePerson, Inc. ($LPSN) | 5.5% | 7.9% | 8.8% | 16.3% | 11.4% |
| PROS Holdings, Inc. ($PRO) | 4.7% | 0.8% | 0.7% | 2.1% | 11.3% |
| |
|---|
| Median (87 companies) | 2.9% | 2.3% | 2.4% | 2.9% | 2.5% |
|---|
| Zix Corporation ($ZIXI) | 3.6% | 4.6% | 5.9% | 6.7% | 8.2% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -210.9% | -256.8% | -416.3% | -247.2% | 137.3% |
| Manhattan Associates, Inc. ($MANH) | 99.3% | 102.5% | 80.9% | 71.7% | 53.4% |
| Citrix Systems, Inc. ($CTXS) | 16.1% | 16.7% | 25.2% | 29.8% | 33.5% |
| Sonic Foundry, Inc. ($SOFO) | -18.1% | -50.6% | -786.4% | - | 31.3% |
| Paycom Software, Inc. ($PAYC) | 75.4% | 51.1% | 47.5% | 47.5% | 28.7% |
| |
|---|
| Median (92 companies) | -9.8% | -11.8% | -10.6% | -4.5% | -2.2% |
|---|
| Zix Corporation ($ZIXI) | 17.6% | 22.0% | 19.0% | -4.2% | 1.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dropbox, Inc. ($DBX) | - | -3.8x | - | 2.4x | 1,341.0x |
| Avaya Holdings Corp. ($AVYA) | - | - | 7.4x | - | 77.9x |
| Alteryx, Inc. ($AYX) | - | - | 2.5x | 6.1x | 32.2x |
| Five9, Inc. ($FIVN) | -6.7x | -8.6x | 7.3x | 5.3x | 17.6x |
| Synchronoss Technologies, Inc. ($SNCR) | - | - | - | - | 11.6x |
| |
|---|
| Median (53 companies) | -0.9x | -0.8x | -0.6x | 0.4x | 0.0x |
|---|
| Zix Corporation ($ZIXI) | -2.3x | -2.5x | -2.0x | 9.6x | 5.0x |
